Question 1

The beginning of a recession is declared by the:

Accepted Answer

A) National Bureau of Economic Research. 
B) Treasury Department. 
C) Fed. 
D) president. 
A) National Bureau of Economic Research. 
B) Treasury Department. 
C) Fed. 
D) president.

Question 2

The Great Moderation consensus was shattered by:

Accepted Answer

A) the Great Recession. 
B) the Great Depression. 
C) World War II. 
D) the Panic of 1907. 
A) the Great Recession. 
B) the Great Depression. 
C) World War II. 
D) the Panic of 1907.

Question 3

The Great Moderation consensus among macroeconomists is that fiscal policy should be used sparingly because:

Accepted Answer

A) monetary policy is always more effective. 
B) it always requires higher taxes. 
C) lags in adjusting to fiscal policy can make it counterproductive. 
D) of the risk of government waste. 
A) monetary policy is always more effective. 
B) it always requires higher taxes. 
C) lags in adjusting to fiscal policy can make it counterproductive. 
D) of the risk of government waste.

Question 4

If the unemployment rate rose, a classical economist would counsel the government to do nothing.

Accepted Answer

A) True 
 B)False

Question 5

Under rational expectations, government policy can be effective:

Accepted Answer

A) if it is rationally thought out before implementation. 
B) if it is anticipated, so people can make realistic preparations. 
C) if it surprises people. 
D) whenever the economy reacts rationally to the decision. 
A) if it is rationally thought out before implementation. 
B) if it is anticipated, so people can make realistic preparations. 
C) if it surprises people. 
D) whenever the economy reacts rationally to the decision.

Question 6

According to rational expectations, monetary policy is:

Accepted Answer

A) always effective. 
B) effective only if it is unexpected. 
C) ineffective compared to fiscal policy. 
D) effective only when fiscal policy accommodates it. 
A) always effective. 
B) effective only if it is unexpected. 
C) ineffective compared to fiscal policy. 
D) effective only when fiscal policy accommodates it.

Question 7

Classical economics is based primarily on the works of John Maynard Keynes.

Accepted Answer

A) True 
 B)False

Question 8

The Great Moderation consensus is that the policy makers of the central bank should be elected so that they are responsible to the voters.

Accepted Answer

A) True 
 B)False

Question 9

According to the theory of new classical economics, if business sentiment and investment spending decrease, the aggregate demand curve _____ and the price level falls, while aggregate output_____.

Accepted Answer

A) shifts right; increases 
B) shifts left; remains constant 
C) shifts right; decreases 
D) shifts left; decreases 
A) shifts right; increases 
B) shifts left; remains constant 
C) shifts right; decreases 
D) shifts left; decreases

Question 10

For the most part, Keynesians believe that:

Accepted Answer

A) monetary policy is best at fighting recessions. 
B) fiscal policy is best at fighting recessions. 
C) a monetary rule is best for evening out the business cycle. 
D) balancing the budget is the best policy for fighting a recession. 
A) monetary policy is best at fighting recessions. 
B) fiscal policy is best at fighting recessions. 
C) a monetary rule is best for evening out the business cycle. 
D) balancing the budget is the best policy for fighting a recession.

Question 11

Crowding out is MOST likely when expansionary fiscal policy is accompanied by:

Accepted Answer

A) expansionary monetary policy. 
B) open-market purchases. 
C) slow growth of the money supply. 
D) an investment tax credit. 
A) expansionary monetary policy. 
B) open-market purchases. 
C) slow growth of the money supply. 
D) an investment tax credit.

Question 12

The political business cycle implies all of the following EXCEPT that:

Accepted Answer

A) central banks should be independent of politics. 
B) discretionary fiscal policy should be avoided. 
C) politicians pumping up the economy in an election year make the economy less stable. 
D) monetary policy is ineffective if inflation is high. 
A) central banks should be independent of politics. 
B) discretionary fiscal policy should be avoided. 
C) politicians pumping up the economy in an election year make the economy less stable. 
D) monetary policy is ineffective if inflation is high.

Question 13

Which of the following statements is FALSE?

Accepted Answer

A) Early Keynesianism downplayed the effectiveness of monetary as opposed to fiscal policy. 
B) Monetarism argued that discretionary monetary policy does more harm than good. 
C) The natural rate hypothesis places sharp limits on what macroeconomic policy can achieve. 
D) Concerns about a political business cycle suggest that the central bank should not be independent and argue for a strong discretionary fiscal and monetary policy. 
A) Early Keynesianism downplayed the effectiveness of monetary as opposed to fiscal policy. 
B) Monetarism argued that discretionary monetary policy does more harm than good. 
C) The natural rate hypothesis places sharp limits on what macroeconomic policy can achieve. 
D) Concerns about a political business cycle suggest that the central bank should not be independent and argue for a strong discretionary fiscal and monetary policy.

Question 14

Keynesian economists didn't oppose monetary policy, but they felt that it was ineffective in fighting a recession.

Accepted Answer

A) True 
 B)False

Question 15

When interest rates are very high, the economy is in a liquidity trap, and monetary policy may be ineffective in fighting a recession.

Accepted Answer

A) True 
 B)False

Question 16

The economy is in a recession. The head of the President's Council of Economic Advisers is an ardent proponent of classical economics. What would this classical economist recommend or not recommend? Explain.

Accepted Answer

This economist would probably not recomm

Question 17

In the late 1970s and early 1980s, the Federal Reserve:

Accepted Answer

A) began targeting the money supply. 
B) began targeting interest rates. 
C) stopped targeting the money supply. 
D) began targeting both the interest rate and the money supply. 
A) began targeting the money supply. 
B) began targeting interest rates. 
C) stopped targeting the money supply. 
D) began targeting both the interest rate and the money supply.

Question 18

According to the Great Moderation consensus today, an unemployment rate of 6% when the natural rate is 4.5% should be countered by:

Accepted Answer

A) decreases in government spending. 
B) increases in tax rates. 
C) increases in the rate of growth of the money supply. 
D) decreases in the rate of growth of the money supply. 
A) decreases in government spending. 
B) increases in tax rates. 
C) increases in the rate of growth of the money supply. 
D) decreases in the rate of growth of the money supply.

Question 19

According to the Great Moderation consensus:
I. monetary policy should be the main stabilization tool.
II. the natural rate of unemployment doesn't actually exist.

Accepted Answer

A) I only 
B) II only 
C) I and II 
D) neither I nor II 
A) I only 
B) II only 
C) I and II 
D) neither I nor II

Question 20

Economists today generally believe that monetary policy can stabilize the economy but not reduce unemployment below its natural rate.

Accepted Answer

A) True 
 B)False

The beginning of a recession is declared by the:

The Great Moderation consensus was shattered by:

The Great Moderation consensus among macroeconomists is that fiscal policy should be used sparingly because:

If the unemployment rate rose, a classical economist would counsel the government to do nothing.

Under rational expectations, government policy can be effective:

According to rational expectations, monetary policy is:

Classical economics is based primarily on the works of John Maynard Keynes.

The Great Moderation consensus is that the policy makers of the central bank should be elected so that they are responsible to the voters.

According to the theory of new classical economics, if business sentiment and investment spending decrease, the aggregate demand curve _ and the price level falls, while aggregate output_.

For the most part, Keynesians believe that:

Crowding out is MOST likely when expansionary fiscal policy is accompanied by:

The political business cycle implies all of the following EXCEPT that:

Which of the following statements is FALSE?

Keynesian economists didn't oppose monetary policy, but they felt that it was ineffective in fighting a recession.

When interest rates are very high, the economy is in a liquidity trap, and monetary policy may be ineffective in fighting a recession.

The economy is in a recession. The head of the President's Council of Economic Advisers is an ardent proponent of classical economics. What would this classical economist recommend or not recommend? Explain.

In the late 1970s and early 1980s, the Federal Reserve:

According to the Great Moderation consensus today, an unemployment rate of 6% when the natural rate is 4.5% should be countered by:

According to the Great Moderation consensus: I. monetary policy should be the main stabilization tool. II. the natural rate of unemployment doesn't actually exist.

Economists today generally believe that monetary policy can stabilize the economy but not reduce unemployment below its natural rate.

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

Exam 18: Events and Ideas

The beginning of a recession is declared by the:

The Great Moderation consensus was shattered by:

The Great Moderation consensus among macroeconomists is that fiscal policy should be used sparingly because:

If the unemployment rate rose, a classical economist would counsel the government to do nothing.

Under rational expectations, government policy can be effective:

According to rational expectations, monetary policy is:

Classical economics is based primarily on the works of John Maynard Keynes.

The Great Moderation consensus is that the policy makers of the central bank should be elected so that they are responsible to the voters.

According to the theory of new classical economics, if business sentiment and investment spending decrease, the aggregate demand curve _____ and the price level falls, while aggregate output_____.

For the most part, Keynesians believe that:

Crowding out is MOST likely when expansionary fiscal policy is accompanied by:

The political business cycle implies all of the following EXCEPT that:

Which of the following statements is FALSE?

Keynesian economists didn't oppose monetary policy, but they felt that it was ineffective in fighting a recession.

When interest rates are very high, the economy is in a liquidity trap, and monetary policy may be ineffective in fighting a recession.

The economy is in a recession. The head of the President's Council of Economic Advisers is an ardent proponent of classical economics. What would this classical economist recommend or not recommend? Explain.

In the late 1970s and early 1980s, the Federal Reserve:

According to the Great Moderation consensus today, an unemployment rate of 6% when the natural rate is 4.5% should be countered by:

According to the Great Moderation consensus: I. monetary policy should be the main stabilization tool. II. the natural rate of unemployment doesn't actually exist.

Economists today generally believe that monetary policy can stabilize the economy but not reduce unemployment below its natural rate.

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

According to the theory of new classical economics, if business sentiment and investment spending decrease, the aggregate demand curve _ and the price level falls, while aggregate output_.